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1 Table of Contents SOLE TRADERS... 6 JOINT VENTURES... 6 FRANCHISES... 7 TRUSTS... 8 Trustees Rights and Powers... 8 Beneficiaries Rights and Powers... 9 PARTNERSHIP Nature of Partnerships Relationship of partners to outsiders Extent of Liability Relationship between partners Dissolution of partnership COMPANIES CLASSIFICATION AND REGISTRATION Pre-registration requirements Registration requirements Circumstances in which courts may lift or pierce the Veil Common Law Corporations Act COMPANIES PRE-REGISTRATION CONTRACTS (2B.3) Promoters B.3 Contracts before registration Relevant Sections COMPANIES CONSTITUTION AND REPLACEABLE RULES Internal rules after 1 July 1998 choice of: Effect of the Corporate Constitution & Replaceable Rules Contents of Constitution Acts not invalid for being contrary to constitution/object/replaceable rules Adoption/Modification/Repeal Remedy for Breach Companies Limited by Guarantee and No Liability Companies MEMBERSHIP Consent Minors Register of members Register location & Inspection Cessation of membership Page 1 of 50
2 SHARES Share Certificates Transfer of shares Transmission of shares DIVISION OF POWER Company Organs Separation of power between Board and GM General Duties Secretary MEETINGS Board Meetings General Meetings (Meetings of Members of Companies) Meeting requirements Annual General Meetings Extraordinary General Meetings Class Meetings SHARE CAPITAL Classes of Shares Preference Shares Characteristics Preference shareholder rights Share Capital Transactions Share Capital Reductions Section 256B Company may make reduction not otherwise authorised Self-acquisition of Shares Share Buy-Backs Financial Assistance Court Orders - Remedies Section Grounds for Court order Section Orders the Court can make Section Who can apply for order Dividends RELATIONS WITH OUTSIDERS (Corporate Contracting) Capacity of Company to Enter into Contracts Methods by which Company Can Enter into Contracts Statutory Scheme Sections 128 and RELATIONS WITH OUTSIDERS (Liability for Wrongs) Roadmap: What type of offence is it? Liability for Civil Wrongs: Tort Page 2 of 50
3 Criminal Liability Common Law: Strict liability Liability that requires fault: Vicarious liability (secondary liability) Liability that requires fault: Direct liability (primary liability) Can company be liable if intent is element of offence? WHO is directing mind and will? Attributing Criminal Liability: Statute Accessorial Liability Privilege against Self-incrimination Page 3 of 50
4 Corporate Law Checklist 1. List issues and relevant sections (reading time) 2. Was the contract entered into by a Partnership? Use Partnership principles. 3. Was the contract entered into by a Partnership which is now a company? Decide whether it was a Partnership contract or a pre-registration contract. Was the contract entered into on behalf of a company, or the Partnership? 4. Was the contract entered into before a company was registered? Use Contracts Before Registration sections ONLY: Was the person who entered into the contract an active or passive promoter? Section 131: did the company: Become registered; and Ratify the contract; Within the time agreed by the parties; or Within a reasonable time after the contract was entered into? If the company became registered and ratified the contract, they are bound. Section 131(4): If the company fails to perform, court may order promoter to pay. Company is not registered or did not ratify the contract (or not ratified in time) Section 131(2): Promoter is liable to pay damages up to the amount that the company would be liable to pay. Section 131(3): Court may order company to pay/transfer property. Mention contractual remedies such as specific performance. Conclusion Page 4 of 50
5 5. Was the contract entered into by a registered company? Did the company enter into the contract directly (s 127) or by an agent (s 126)? If the company entered into the contract directly, the company is bound. Did the agent have authority? If yes, company is bound. If no, was there implied authority? A director/secretary has implied authority to exercise powers customarily exercised/performed by a person in that position. Section 128 Entitlement to make assumptions Did the person wishing to enforce the contract have dealings with the company? Assumptions apply despite fraud. Section 128(4): Assumptions are not valid if known or suspected to be incorrect. 128(4): Is the person relying on the assumptions an individual or part of a company? If the person is an individual, it is that person s knowledge/suspicion. If it is a company, use Tesco/Meridian tests to determine whether there was knowledge/suspicion. To give effect to this particular section, whose knowledge/intent should be the knowledge/intent of the company? The brain (Tesco) or the hands (Meridian)? Would the section have little effect if we only look at the brain? Section 129 What assumptions can the person rely on? Assumptions must be proved by the person. List the relevant assumptions that were made. 129(3) did the person who did the holding out have authority? 129(3)(b) deemed authority only goes so far as someone in that position normally has. If the defect is not covered by the assumptions use Indoor Management Rule Conclusion Page 5 of 50
6 SOLE TRADERS Definition of a sole trader An individual, natural person, who owns a business enterprise and is its principal Law applicable to Sole Traders Business Names Registration Act, 2011 (Cth) General laws Simple, private and risky. Advantages: Easy, minimal required action, private. Disadvantages: Liability (no separate legal entity). Liable to the full extent. JOINT VENTURES A joint venture is an arrangement where separate business enterprises conduct a project or venture in combination. If stop at this then independent, but if more than may be a partnership. Look at what the joint venture is doing to determine this if what the parties are doing together is a one off, then it is probably a joint venture. If it involves a recurrent or ongoing relationship, then it is probably a partnership. Simple contractual agreements at arm s length. There is no fiduciary relationship/duty. Don t need to look after other parties interests, only their own. JV vs Partnership If you have a predetermined share of the product/income rather than of the final product, that looks more like a JV. Ie bare own costs. JV can normally sell share to third party, subject to contractual obligations, whereas there is stronger control in a partnership. JV bare own costs and don t owe fiduciary duties. United Dominions Corp v Brian Shared interest in the land for a shopping centre development. Parties had signed contract stating JV. Shared assets had been used as security for the debts of only one coventurer. This looks like partnership sharing/letting use assets for debts. Mutuality of rights and obligations this was a partnership not a JV. Canny Gabriel v Volume Sales Involved the tour of Australia by 2 popstars. Entered JV. One entity in charge of box office and one in charge of finance. Looked at the degree of mutuality between the parties. Designed to share profits. If sharing profits as opposed to takings then it is likely to be a partnership, not a JV. Profit is money generated by overall undertaking. Takings is income if 40% goes here, etc, then takes out their own expenses out of the takings and that is individual profits. Not sharing in the overall enterprise. Advantages of Joint Ventures Not liable with other people involved in the enterprise. JV are not regulated no JV Act. Don t have to register it is a contractual arrangement. Simple to establish Private. Partnerships have a statutory obligation to disclose anything that might be relevant to co-partners. Page 6 of 50
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